Yuri Barsukov, Kommersant
Gazprom searches for gas in Tanzanian waters
The company is seeking to obtain a license for developing the country's offshore zone
Gazprom has taken an interest in Tanzania's deep-sea shelf and is seeking to obtain a license for the development of a block. Analysts believe the extraction project in Africa to be in keeping with the company's strategy to increase its presence on the liquefied gas market. However, Gazprom lacks experience of deep-sea mining and may need a partner for the project which may prove challenging in light of the current tense relations between Russia and the West.
Gazprom took part in the licensing round for blocks in Tanzania's deep-sea shelf and put in a bid for one, Interfax reports. Gazprom announced its interest in the tender back at the beginning of February, sending a delegation from its subsidiary Gazprom International to Dar es Salaam and requesting geological information. The tender includes seven deep-sea blocks and another block in Lake Tanganyika, although bids have only been submitted for four blocks. Of greatest interest is Block 4/3A, for which China's CNOOC and the joint venture between Statoil and ExxonMobil (which is already developing neighbouring Block 2) have all submitted bids. Block 4/3B, for which Gazprom is bidding, covers an area of 3,000 square kilometres and is located right behind block 4/3A in the open sea, with depths of between 2.5 and 3 kilometres.
The Tanzanian government estimates its prospective offshore gas resources at 5.7 trillion cubic meters. To date, licences have been issued for 12 coastal blocks. Most development has been carried out in the first four blocks, with discoveries of approximately 1 trillion cubic metres of reserves: The development of blocks 1, 3 and 4 is being undertaken by the consortium of Britain's BG (60%) and Ophir Energy (40%), with block 2 being developed by the consortium of Statoil (65%) and Exxon (35%). These companies intend to build a gas liquefaction plant with a capacity of 10 million tonnes as this is essentially the only means of gas monetisation in Tanzania. The country's domestic market is very small and last year less than 1 billion cubic metres were produced. Nevertheless, the government plans to increase domestic gas consumption primarily for the needs of power generation: every mining licence indicates the volumes of gas which must be supplied to the domestic market.
If Gazprom's bid is successful, the company will have to sign an production sharing agreement with the country's state oil and gas corporation TPDC, which will have a minimum stake of 25%, and will also have to pay 7.5% royalties, a licence fee (the amount of which depends on the size of the area being developed) and other premiums. There are also other encumbrances connected with the need to hire local subcontractors, etc. At the same time, Gazprom could be compensated by up to 50% for development costs. The licence is issued for 25 years with the right to an extension for another 20 years.
"Gazprom has decided to develop the LNG sector in earnest and the company doesn’t have so many options for foreign projects in this field," says Roman Kazmin, head of LNG at ICIS Heren. "It’s too late to join Australian projects and in the USA the political risks are high. That leaves Africa." Mr Kazmin pointed out that Western Africa, particularly Tanzania, was in a good location to access the main LNG markets in Asia and Europe. Earlier, Gazprom had told Kommersant that West Africa could be seen as a base for the supply of LNG to India. But according to Roman Kazmin, Gazprom lacks experience of deep-sea gas extraction, and if the Russian company decides to go ahead with this project it will need a western partner. Last week, there was talk of the European Union and the USA imposing new sanctions on Russian companies, prohibiting the transfer of technology in the oil and gas sector (see the 14 May issue of Kommersant). This could make it difficult to attract a partner. However, so far the European Commission is stating (see note) that there are no plans to impose sanctions on collaboration in the energy sector.